India's appetite for natural gas is set for a significant upswing in the coming years, driven by a massive expansion of infrastructure to deliver the cleaner fuel to homes and industries. According to a recent analysis by the credit rating agency ICRA, the country's domestic natural gas consumption is projected to grow at a compound annual growth rate (CAGR) of 3.45% from the financial year 2024 to 2027 (FY24-FY27).
Key Drivers: City Gas Networks and Industrial Demand
The primary engine for this growth is the aggressive expansion of the City Gas Distribution (CGD) network across the nation. The government's push to increase the share of natural gas in the country's energy mix from the current 6% to 15% by 2030 is a central pillar of this strategy. The CGD sector itself is expected to see its consumption rise at a much higher CAGR of 8-9% over the same period.
This expansion means more households will have access to piped natural gas (PNG) for cooking and more vehicles will be able to use compressed natural gas (CNG). Beyond the CGD sector, demand from other key industries is also expected to remain robust. The fertilizer and power generation sectors are likely to continue being major consumers of domestic natural gas, supporting the overall consumption figures.
Supply Dynamics and Pricing Challenges
On the supply side, ICRA notes that domestic natural gas production is anticipated to increase, led by new field commencements. Key projects expected to boost output include those in the Krishna Godavari (KG) basin, such as the MJ field and additional wells in the R-Cluster. This rise in domestic production is crucial for meeting the growing demand.
However, the report also highlights a persistent challenge: the high cost of imported liquefied natural gas (LNG). The price of LNG on the international spot market has been volatile and often elevated, making it a costly alternative for price-sensitive segments of the Indian market. This price disparity continues to affect the demand from sectors like power and city gas distribution, which are highly sensitive to fuel costs.
Economic and Environmental Implications
The projected growth in natural gas consumption carries significant positive implications. From an economic standpoint, increased use of domestic gas reduces reliance on expensive energy imports, aiding the country's trade balance. For industries and consumers, it offers a potentially more stable and cleaner-burning fuel alternative.
Environmentally, the shift aligns with India's commitments to reduce emissions. Natural gas serves as a bridge fuel in the energy transition, producing fewer pollutants than coal or oil. The expansion of the CGD network, in particular, can directly improve urban air quality by providing a cleaner alternative for transportation and household use.
In conclusion, ICRA's outlook paints a picture of steady growth for India's natural gas sector, underpinned by strategic infrastructure expansion and supportive policy goals. While pricing challenges for imported gas remain a headwind, the rise in domestic production and the unwavering focus on expanding the CGD network are set to propel consumption higher, contributing to both economic and environmental objectives.
